How does tourism affect the economy?

Positive Impacts of Tourism

How does tourism affect the economy?

Unfortunately, everybody’s favorite answer is… “it depends”. That was very likely not the answer you were looking for, but it is an honest assessment of tourism’s impact on an economy. Tourism can be a positive impact to an economy, but it can also be a negative impact to an economy.

How the community deploys and supports the economy is actually the critical factor. For every economic success story rooted in tourism, there are countless other horror stories to match. Using tourism to create a vibrant economy requires thoughtful consideration, consistent management, and a commitment to a higher quality of life for all residents.

There are some recurring economic development patterns based on tourism that should be considered. From the research, an area that creates a tourism activity has created an opportunity for future sustained economic growth. However, if the economy, the community, and the sector are not closely measured, it can create undesirable effects on the current citizens’ quality of life.

An effective way to think of a tourism economy like a chain of fireworks with a very long connected fuse. Unfortunately, not every area has a compelling tourist activity that persuades visitation from outsiders. But, if the economy does, the first economic/social indicator to reflect this reality will be a little bit of income growth by existing business owners. If this tourist activity is likely to sustain, the second firework to ignite will likely some level of employment gain, albeit initially in part-time service work. Again, if the area is fortunate enough to sustain the tourist activities this will fire the third firework that is new business starts. It is about this time that the tourist area should start seeing some growth in cyclical economic services concurrently. Eventually, an area will see recurring tourists (perhaps even with real estate investments in the community). The last economic and social needle to move is the increase of population. However, at each step in this cog, the community has another opportunity to further entrench their economy as a tourist economy. In all cases, municipal leaders should consider themselves stewards of their community helping to maximize growth, prosperity, and quality of life for their residents.

Unfortunately, many municipal leaders in tourist areas do not fully understand the mechanisms, the metrics, and the outputs of a tourist area. Without understanding the overall economy, how to foster growth, and without good data in hand it becomes increasingly difficult to make informed decisions.